Problem 1. White Wedding Corporation will pay a $3.05 per share dividend next year. The company pledges to increase its dividend by 5.25 percent per year, indefinitely. If you require an 11 percent return on your investment, how much will you pay for the company's stock today?
Problem 2. Fama's Lamas has a weighted average cost of capital of 9.8%. The company's cost of equity is 15%, and its cost of debt is 7.5 percent. The tax rate is 35 percent. What is Fama's debt-equity ratio?